Cable's Yin and Yang: Comparing Comcast and Charter's different approaches to user guides

Comcast X1
Image: Comcast
Image: Warner Bros. Pictures

In Tim Burton's wildly inventive 1985 comedy Pee-Wee's Big Adventure, the title character spends most of the film trying to reclaim his stolen bike, a frilly, pimped out, elaborately customized 1941 Schwinn Pullman, somewhat grandiosely monikered the "X1."

If actor Paul Reubens' iconic uber-dork were into, say, fully belled-and-whistled IP-capable pay-TV set-top boxes instead of red bicycles, you'd probably end up with Comcast's X1, a cloud-based platform featuring perhaps the most advanced, most expensive, most feature-rich device ever deployed on a mass scale by a pay-TV operator.

A costly quest

Certainly, the MSO's attempt to deploy X1 across its huge 22.3 million video-subscriber footprint--and keep it operational--has been almost as epic a quest as Pee-Wee's cross-country bike search. As of Oct. 23, two years and five months after its initial launch in Boston, Comcast had deployed about 5 million X1 boxes. (The MSO says it's averaging about 20,000 X1 installs a day.)

To speed up the pricey, cumbersome deployment, Comcast (NASDAQ: CMCSA) has been experimenting with solutions that allow customers to install X1 themselves. The MSO, meanwhile, has also recently struggled with a series of service outages for the complex platform.

Comcast X1
The X1 guide. Image: Comcast

At least publicly, however, Comcast executives say they're thrilled with X1's early yield, noting that X1 customers engage in about 20 percent more VOD transactions, watch more linear TV and generally deliver higher ARPU than those that use the legacy platform. Comcast also says it's seeing a 20 percent reduction in voluntary churn among its X1 customers. Comcast, summed up company Vice Chairman and CFO Michael Angelakis during its third-quarter earnings report in October, is getting a "pretty darn good return on investment on X1."

Comcast executives describe the function of the X1 set-top as a kind of web browser, rendering the interface sent over IP and continuously developed and upgraded by Comcast in the cloud. The price to install X1 isn't cheap. Comcast doesn't share such figures, but media analyst Craig Moffett estimates that the average cost to deploy an IP-based system like X1 comes in at around $440 per household.

To cable industry watchers, one particularly notable aspect of X1's big, splashy, complex deployment is its contrast to the also-cloud-based, but far more minimalistic approach being adopted by Charter Communications (NASDAQ: CHTR). It seeks to upgrade the user experience of its customers with a nifty, next-generation, continuously updated user interface, the Spectrum Guide.

Turning to the cloud

Both X1 and Spectrum Guide work to achieve the goal of creating a graphically rich, intuitive, Netflix-like user experience for video subscribers. But while X1 packs what is perhaps a richer experience via advanced IP hardware, Spectrum Guide delivers many of the same benefits through a far less expensive deployment strategy.

Already rolled out to 25,000 Charter customers in the Dallas-Fort Worth area, with a footprint-wide deployment set for 2015, Spectrum Guide uses cloud-based computing technology made by ActiveVideo to render the IP interface at the server level.  That interface is then encoded into MPEG-2 video and sent to legacy set-tops through a video channel reserved for VOD.

With Spectrum Guide, a Charter customer can keep their decade-plus-old Motorola DCT 2000 set-top box. And Charter doesn't have to replace it with a pricey IP-based box at the end of its lifecycle.

"Every time Comcast wants to turn on the X1 experience, they have to do a truck roll and deploy a box. They can do only a few installations a day because of that," noted one engineer who has worked closely on developing Spectrum Guide. (He spoke anonymously with FierceCable, as he was not authorized to talk to the media.) "Customers don't care about a shiny new box. What they care about is the experience."

Charter cloud UI
Charter's cloud-based user interface for its
Spectrum service.
Image: Charter Q4 2013 investor presentation

Moffett finds the capital expenditure cost savings potential intriguing, noting, "If successful, this could substantially reduce set-top box replacement cycles, and therefore reduce capex, and it would facilitate a radically faster deployment of this advantaged user experience.

"The largest cost element, of course, is deploying IP-enabled STBs," Moffett explains. "At about $300 per advanced box and $70 per slave box, the costs that can be avoided by ActiveVideo's technology are dramatic."

The analyst estimates that for a standard install for an advanced, IP-based set-top like X1, featuring one master and two slave boxes, total costs approach $440. Conversely, each truck roll for a legacy box replacement only runs about $250 per household, Moffett notes.

Moffett estimates total costs to build a cloud-based system like Spectrum Guide to come in at around $600 million, with most of the cost consumed by network infrastructure. Conversely, he estimates complete deployment of an IP-based set-top solution to exceed $3 billion.

The race to market is on

"Perhaps more important than the capex savings, however, is the dramatically faster time to market enabled by ActiveVideo's boxless IP solution," Moffett adds. "Charter could have its fully interactive user interface in front of all of its customers--including those acquired or swapped with Comcast/TWC--in a year. This faster deployment is critical to supporting higher price realization."

Of course, any qualitative comparison to X1 must take into account that Comcast's platform is now in more than 5 million homes--less than Comcast would probably like, but certainly enough so that the MSO can tout impressive metrics in quarterly earnings reports. And minus the technical hiccups in November, users report general happiness.

Until Spectrum Guide more fully unfurls in 2015, we won't know how it will impact things like Charter's ARPU, churn or overall customer satisfaction.

For their part, Comcast executives demurred comment. However, one company executive, speaking anonymously due to the fact that he wasn't authorized to talk to the media, said Comcast was particularly pleased with the "flexibility and scalability" of its IP devices.

The advanced boxes, which include six tuners, have enabled Comcast to steadily add features, such as an RF remote control.

"Sometimes having that new piece of hardware in your living room can be a real advantage," the executive said. "It really allows you to take advantage of new technologies."

Cable's Yin and Yang: Comparing Comcast and Charter's different approaches to user guides

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